When trading the markets, it often easy to make a big deal about nothing. We believe in the “must trade,” a trade we think we have to make, and unless we do, we feel that we missed out on the action. Or we place all our hopes on a single market event, betting a lot more than we should on what we wrongly think is “a sure win.” Until the outcome is realized, however, you don’t know beforehand that the outcome of a particular trade will be more significant than any other trade. Only in hindsight do we really know that a trade is more significant than any of the other hundreds of trades we’ve made in our career.
So as you plan, execute, and monitor a trade, you should give it no more significance than any other trade. In the big picture, any single trade is just one trade among a bunch of trades you’ll make throughout your career. Looking at a single trade from the right perspective can do wonders to keep you calm and rational. If it is relatively minor, why worry about it? Thinking of the big picture helps you trade in a peak performance mindset.
Even though it is vital that we focus all our energy on the current trade, it is also necessary to remember that it is of little real significance in the long run. It is essential that you consider, at least in the back of your mind, that a single trade is just one among a series of trades, and that the bottom line is the overall outcome across the series, not any single outcome.
There are psychological advantages to downplaying the outcome of any single trade. It is less critical to your ego, for example. When viewed as just a single trade in a long line of trades, it’s easier to think convincingly, “It doesn’t matter. There will be many more trades and opportunities to come.” If there isn’t much riding on the outcome of a trade, it will free up precious psychological energy.
You won’t waste your limited psychological resources needlessly worrying about the outcome. You will feel free and creative, ready for whatever happens next. All your attention will be focused on trading your plan, objectively analyzing how market moves fit into your plan and taking decisive action for a clean exit.
But minimizing the significance of a trading outcome isn’t about fooling yourself. Risk management is crucial. If you have 50% of your trading capital riding on the outcome, for example, it’s not realistic to fool yourself into thinking that the outcome is relatively minor. In this case, the outcome is, in fact, a big deal. If you are going to view a single trade as merely a minor event among a series of events, you must limit your risk.
By limiting your stake to a small percentage of your trading capital, the trade will have minimal financial significance. It will be of little consequence compared to your overall account balance. If it is so unimportant that it doesn’t really matter, you’ll feel it, and trade more creatively. So don’t get yourself hung up on the outcome of a single trade. Control your risk. Minimize a trade’s significance. Feel free and creative, and make trade after trade until you make huge profits across a series of trades.